Investment outlook 2019: Conclusion - J.P. Morgan Asset Management

Investment outlook 2019: Conclusion

Contributor Karen Ward
Conclusion: Travelling through turbulence

In 2019, the US economy is not expected to outperform on the scale it did in 2018, so a regionally diversified portfolio makes more sense, particularly given the potential for a change in the direction of the US dollar.

Although the risks to corporate earnings are building globally, for European investors the relative attractiveness of fixed income as an alternative to equities is limited. So we should be more conservative about the near-term returns we can expect to achieve from a balanced portfolio in 2019.

It will also be important to be wary of becoming over-reactive to political noise and opting for dramatic shifts in allocation. For one, decisions and sentiment can change quickly. The US and Chinese authorities could yet return to the negotiating table and stem trade tensions. Indeed, the more that bad news builds in the near term, from either the economy or the markets, the higher the incentive for politicians to consider a more amicable conversation.

At this stage, therefore, we would consider relatively small changes to improve the resilience of a portfolio. Within equities, look for regional diversification and consider moving to larger cap stocks, with a bias towards quality and value styles over growth. Fixed income should play a greater role, but be selective and consider alternatives such as macro funds to add ballast to a portfolio (see On the Minds of Investors – How should we prepare portfolios for the next downturn?).

This flight may be getting closer to its destination. But those that adopt the brace position could lose sight of the controls, and the ability to make the most of the opportunities that present themselves in periods of turbulence.


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Key themes for 2019

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